ISA Allowance ? Why You Should Use Yours
An ISA – or Individual Savings Account, is a government scheme designed to encourage us to save. Every year, we are each given a set limit, and all interest you earn within that limit is tax-free. (Given that the tax on your regular accounts is automatically deducted, many people aren’t actually aware that they pay on tax on the interest in their accounts.)
It seems from market research carried out by various companies that one of the reasons so many people are shunning ISAs is because of the low interest rates on offer. Certainly, the fact that the Bank of England base rate is the lowest it’s ever been makes it a lot harder to find ISA rates of 5 or 6% that were once common place.
However, even with rates as they are, ISAs can be an extremely effective way of saving money. If you plan on making regular, long-term savings in to your ISA account, the savings versus a regular account can indeed be significant. Indeed, if you were to save £50 a month over 20 years, on an account with a 2% rate, you’d save £300 in tax! To put that another way, that’s like 6 months free saving, courtesy of the tax man. If you are a higher-rate tax payer or that figure become even more significant.
For those who are still looking for a potentially higher rate of return, you can still do so in a tax efficient manner. A Stocks and Shares ISA allows you to invest £7,200 a year in the stock market. The tax savings will depend on your individual circumstances as will the amount of money you earn. As investments of this nature can go up as well as down, you won’t have the guarantee that would have with a cash ISA (or indeed, with a regular savings account) but the income generated (and the tax savings) have the potential to be an active part of any investment portfolio.
Where to invest your money is an important decision, but it’s also a personal one. Before the end of the tax year, make sure you get the financial advice that you need to make the most of your savings and investments.
Fidelity is the world’s largest mutual fund company. In the UK they provide a range of savings and investment solutions for both individuals and corporations. From ISAs to pensions advice, visit www.fidelity.co.uk for all your investment needs.
Article from articlesbase.com
Tagged with: allowance • isa account • isa rates • should • yours
Filed under: Best Cash Isa Rates
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